Comcast has reportedly turned its back on promises not to data discriminate

Internet video has a problem. Many of America's top cable providers -- such as Time Warner Cable, Inc. (TWC) and Comcast Corp. (CMCSA) -- also happen to be cable television providers. The last thing they want is people ditching cable TV for cable internet video, which hits them with a double whammy of extra bandwidth demands and less subscriber revenue.

I. Are Cable Companies Violating Their Promises?

According to a report in The Wall Street Journal, the U.S. Department of Justice (DOJ) has initiated a probe into concerns that Comcast and others are working to quash internet video. It's talked to Hulu and Netflix, Inc. (NFLX), leading net-video providers as well.

The DOJ probe could have major impact if the department decides that antitrust violations have occurred. The government agency has made waves in recent months sinking AT&T, Inc.'s (T) acquisition bid of Deutsche Telekom's (ETR:DTE) T-Mobile USA and by suing Apple, Inc. (AAPL) and top e-book publishers for price fixing.

Among the decisions that triggered the new probe was Comcast's decision to offer free data to customers who use its Xfinity app on Microsoft Corp.'s (MSFT) Xbox 360 console. Both Netflix and Hulu's apps count towards users' capped data limits, but the ISP's own app does not.

Comcast has been accused of data discrimination by rivals. [Image Source: Zachary Kaufman]

The issue is complicated by the fact that some major internet video providers are actually owned by the same companies looking to damage them. For example, while Comcast's decision may damage Hulu, Comcast is also a major owner of Hulu, along with News Corp. (NWS).

Comcast is treading on thin ice as it promised in 2011 to treat competitors' data the same as its own, as part of its purchase settlement with the DOJ regarding its purchase of NBCUniversal. Now it appears to be forgetting its promises.

II. Channel Providers Pressured Into Bundling

The DOJ is also examining the "fairness" of contracts that cable providers push channel providers into. One practice under investigation is cable providers' efforts to block channel providers from individualling selling a channel, instead forcing them to opt into authentication schemes.

In other words, ESPN might want to offer to sell you its channel for $2.50 a month with open access, but cable companies have currently nixed that option. The cable companies instead force you to buy their TV packages, which run $30 USD per month or more, in order to gain access. Only customers who authenticate themselves as cable subscribers can then access ESPN on mobile devices.

At a Tuesday Senate hearing, Attorney General Eric Holder let it be known where his sympathies lie. When Sen. Al Franken (D., Minn.) suggested that some customers wanted to ditch cable and watch internet video instead, the Attorney General remarked, "I would be one of those consumers"

I don't know why you got rated down. I completely agree with every point you made.

I had comcast for years and just recently moved into a building contracted to RCN cable, which sucks and costs more than Comcast, and when I called Comcast a few weeks after moving to cancel, they promptly canceled and back-dated my refund. I couldn't believe it, I almost felt bad leaving them just because they didn't put up a fight to cancel. I also went over my 250GB cap numerous times (way over 300GB one month because my torrent community had locked-ratios during XMAS) and I received no penalty, email, or phone call.